Companies: eyes on green bonds

Green bonds are credit instruments issued by public or private entities. The main difference compared to other marketable securities is that the funds are used exclusively to finance or refinance, in part or in full, environmental projects, whether new or existing. Initiatives of this type can advocate for social causes.

In 2007, Swedish pension funds expected to invest in projects related to the environment and, not finding a way to finance them, they brought this concern to the World Bank Treasury. Months later, this entity issued the first Green Bond, thus inaugurating a new way of connecting investors who are committed to environmental initiatives and the creators of these ideas. This first instrument served as a model for the current market that has been in constant development for more than a decade.

Green bonds are credit instruments issued by public or private entities. The main difference compared to other marketable securities is that the funds are used exclusively to finance or refinance, in part or in full, environmental projects, whether new or existing. Initiatives of this type can advocate for social causes.

When environmental and social causes are combined, the bonds are called sustainable or sustainable bonds.

A growing market


The green bond market plays an important role in financing environmental projects seeking for a more sustainable world. In 2018, US $ 167 billion were issued globally in these instruments. What is relevant about this figure is that ten years ago they practically did not exist.

Between January and November 2019, Global Green Bond issuances exceeded $ 200 billion, setting a new record, according to the Climate Bonds Initiative (CBI). This body forecasts that by the end of this year it will reach 250,000 million US dollars and also estimates that in 2030 projects related to climate change will require an investment of approximately 90 billion US dollars.

Several factors are contributing to the boom in this rising market. One of them is a greater participation of new corporate issuers in Europe, America and Asia. The Green Bond market has been experiencing exponential growth since the latest years.

Among the companies that are positioned as leaders in these investments are Public and Financial Services Companies, but there are also other industries that, little by little, are joining this trend.

On the demand side, year after year, the interest in these assets by institutional investors from all over the world increases.

What are the benefits for companies?

Although many, and increasingly, companies devise and implement their own sustainable development initiatives as part of their corporate actions and business culture, investing in external projects gives them greater credibility and authenticity.

Through the issuance of Green Bonds, organizations are able to expand their investments, mark their differential with competitors and other players in the sector, as well as improve their image and reputation.

According to the consulting and advisory firm PwC, the issuance of Green Bonds “is consolidated as the best financing alternative for companies that incorporate sustainability into their corporate strategy.” The consultancy also maintains that these bonds “generate a diversification of investments, capturing new business opportunities by taking advantage of growing demand as well as attracting long-term capital.”

In some cases, the issuance of Green Bonds is cheaper than that of conventional ones, as was observed in multi-tranche placements. Precisely in investments that launch two or three placements at different terms at the same time and the bond that shows the green seal was sold in relatively cheaper terms.

Regulations and agreements

Green Bonds allow a new form of financing for those interested in collaborating with the fulfillment of the Sustainable Development Goals (SDG), the goals set by the Kyoto Protocol and the Paris Agreement in order to mitigate the effects of global warming and promote greater environmental and social responsibility, as provided by the United Nations Global Compact.

Green Bonds are aligned with the official standards of the Green Bond Principles (GBP) of the International Capital Market Association (ICMA). These standards were updated at the third Annual General Meeting held in Paris (France) in June 2018 and promote the integrity of the market, through trust, publicity and reporting. For all the above, Green Bond issues must provide an investment opportunity with transparent environmental credentials.

According to the GBP, a bond is certified “green” if it addresses one or more categories related to preserving the environment, including sustainable management of natural resources and land use, reducing emissions. atmospheric conditions, the control of greenhouse gases, sustainable forestry (together with forestation and reforestation), the restoration of natural landscapes and the conservation of biodiversity. These purposes are the same as GreenBond Meter (GBM) pursues.

The National Securities Commission (CNV) in March 2019 presented in Argentina the guidelines for the issuance of the panel of green, social and sustainable bonds (SVS) in the national market, with the aim of attracting investors and facilitating their local development. With the assistance of the United Nations and the Climate Bonds Initiative (CBI), the entity produced a public consultation guide in which it details the implementation of mutual funds and financial trusts dedicated to investing in these assets.

In this way, the country joined to promote green finance, through Bolsas y Mercados Argentinos S.A (BYMA).

The GreenBond Meter (GBM) Initiative

The effects derived from progressive climate change and its global consequences at the economic, social and environmental level motivated GBM to create a solution to counteract its impact.

The GreenBond Meter (GBM) initiative invites you to recover natural heritage by saving 1 square meter of the biosphere from deforestation, that is, one square meter of virgin land in the Paraná jungle of the province of Misiones (Argentina). The main objective of this initiative is to reach one million hectares of carbon sinks in at least ten places on the planet. It currently has its own 25,000-hectare property named GS1, located in the Paraná jungle in the province of Misiones (Argentina). 

How?

Recovering the natural heritage is possible through the acquisition of the virtual token GreenBond Meter Coin (GBM Coin), issued by Heimdall Technologies OÜ (Estonia) with a Financial Intelligence Unit (FIU) license granted by said government. GBM Coin is the first cryptocurrency backed by the preservation, conservation and restoration of natural capital at the 1 GBM / 1M2 parity.

Nideport SA (Uruguay) will issue each year a GBM bond (a carbon bond), by which the GBM coin holder and other users will not only be able to contribute to the conservation of this natural area but will also be able to obtain an economic reward and access to the exclusive preferential purchase exchange for registered users on the company’s platform, with a 50% discount from others in the bond, among other benefits.

From now it is possible to preserve the environment and obtain an economic reward in return. GBM is an ecological-technological initiative that seeks to redefine how businesses and the care of the natural environment are conceived, democratizing access to the carbon credit market as a sustainable means of protecting the planet. 

There is still a long way to go, but the need to act urgently imposed by climate change and the commitment of investors to do business while taking care of the planet encourage this market to expand more and more.

#News #Green bonds #Ecology #Nature #Environment

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